Federal Reserve chairman Jerome Powell said rates are “just below” the range of a neutral policy
by Randall Jensen and Vildana Hajric
Stocks rallied and the dollar fell after a dovish tone from the Federal Reserve chairman fueled speculation the central bank is closer than thought to pausing on rate hikes.
The S&P 500 surged to a session high and the Dow Jones Industrial Average jumped more than 400 points after Jerome Powell said rates are “just below” the range of a neutral policy. The chairman said the economic outlook remains “solid,” bolstering expectations for a rate hike when the Fed meets next month, but he noted that the effects of higher rates take time to show up in data. All told, investors surmised the bank is likely to reduce the number of hikes or outright stop them next year.
“He’s taking away the concern about aggressive interest rate increases, which resolves one of the issues that hung over the markets during the last couple of months,” Bob Phillips, managing principal at Spectrum Management Group, said in an interview. “We still have the trade war issue with China and we’ll see how that works out this week. If that comes out positive, we’ll have a decent rally at the end of the year.”
Tech shares that bore the brunt of the October sell-off led the rally. The dollar slumped the most in two weeks and the 10-year yield reversed an initial knee-jerk decline to trade at 3.06 percent. Oil turned higher with industrial metals.
Trade also remained in focus, carmaker shares under pressure after President Donald Trump threatened tariffs and renewed his haranguing of General Motors for closing U.S. plants. Trump heads to the Group of 20 meeting tomorrow where investors will look for progress in his trade war with China. Salesforce.com surged after reporting strong third-quarter results, while Tiffany tumbled on its earnings.
Major stock moves:
Financial firms rebounded from early losses as rate-sensitive shares helped pace gains. Utilities that had held up best during the October rout were the only group in the S&P 500 to retreat Salesforce.com surged around 7 percent, while Tiffany & Co.’s plunged more than 10 percent.
Coming Up
Trump and President Xi Jinping plan to meet at the G-20 summit in Argentina that kicks off on Friday. Thursday sees the release of the minutes from the Federal Open Market Committee’s November meeting.
These are the main moves in markets:
Stocks
The S&P 500 Index gained 1.5 percent as of 12:47 p.m. New York time. The Stoxx Europe 600 Index was little changed. The MSCI All-Country World Index climbed 0.3 percent to the highest in more than a week. The MSCI Emerging Market Index increased 0.7 percent to the highest in almost three weeks.
Currencies
The Bloomberg Dollar Spot Index fell 0.3 percent. The euro advanced 0.5 percent. The Japanese yen rose 0.1 percent. The British pound gained 0.4 percent.
Bonds
The yield on 10-year Treasuries was little changed at 3.06 percent. Germany’s 10-year yield was steady at 0.35 percent. Britain’s 10-year yield declined two basis points to 1.377 percent.
Commodities
The Bloomberg Commodity Index gained 1.1 percent. West Texas Intermediate crude fell 0.1 percent to $51.49 a barrel. Gold rose 0.4 percent to $1,225.30 an ounce.
Copyright Bloomberg News
